Year End 2014 Market Report Summary Lee & Associates Greenville
A theme we have seen throughout 2014 is a large amount of construction and development. This is happening at a rapid pace in order to supply industrial buildings and spaces to keep up with demand. As 2014 ends and 2015 begins, we are seeing the market for available space shrink in volume and pricing rise as an effect of demand. This is because new, national name companies are being attracted to Greenville at a pace unlike we have seen before, and they are rolling in as fast as their cars will bring them. With the large amount of activity happening in the market, we are diligently on the road, searching the industrial market for places and spaces to meet this clientele's needs.
- The Greenville/Spartanburg industrial market ended the fourth quarter of 2014 with a vacancy rate of 7.0%. This represents a decrease from 7.6% at the end of the third quarter, 7.8% at the end of the second quarter, and 8.1% at the beginning of the first quarter.
- The industrial market has seen significant absorption rates for all of 2014. The year ended on a strong note with over 1.5 million square feet absorbed in the fourth quarter alone. That compares to positive 663,011 square feet in the third quarter, positive 437,394 square feet in the second quarter, and positive 294,667 in the first quarter.
- Rental rates averaged out at $3.47/SF per year at the end of the fourth quarter 2014. This represents an approximate 5% increase in quoted rental rates when compared to the third quarter, when rates were reported at $3.31/SF.
- One of the biggest projects announced in the state is the new Giti Tire Plan in Chester, a proposed 1.8 million square foot manufacturing facility with the first phase scheduled to break ground in January 2015.
The flex market in the upstate has been on a roller coaster over the last two years, with its own ups and downs, trying to cement its place in the market. Looking back on 2014, with the effects of industry announcements, including recently announced expansions by BMW, several new tire producers helping to solidify South Carolina's position as the No. 1 tire producer in the U.S., and an overall upswing in the economy, things are looking better every day.
- The flex market experienced a positive net absorption of 45,522 square feet in the fourth quarter of 2014. This is a nice change from the previous two quarters, which both recorded negative net absorption rates (-18,628 square feet in the third quarter and -9,115 square feet in the second). Absorption was positive for the first quarter, with a reported absorption of 29,155 square feet.
- This positive consumption of space is further supported by the ever declining vacancy rates the market experienced throughout 2014. At the beginning of 2014, the flex market began with a vacancy rate of 9.8%. To go along with the negative net absorption the market experienced at the mid-year mark, the vacancy rate for the second quarter increased slightly to 10.4% and then 10.6% at the end of the third quarter. As 2014 ends, we are right back on track with a notable dip in vacancy to 10.0%.
- Rental rates were recorded as $7.10/SF per year at the end of the fourth quarter in the market. Rates had been $6.79/SF at the end of the third quarter and $7.15/SF at the end of the second quarter. These figures bring us full circle as $7.10/SF is the rate we began 2014 with.
There were some strong gains in the office market as rental rates steadily climbed throughout the year and the market experienced strong absorption rates for two of the four quarters in 2014. Just like a game of chutes and ladders though, things can change quickly. As evident with the vacancy rate over the past three years, sometimes things are up, and other times you may find yourself back at square one. Regardless of where the market may be at a certain point in time, things can always turn around in your favor during the next turn...
- Net absorption for the overall Greenville/Spartanburg office market was positive 27,551 square feet in the fourth quarter of 2014. This compares to positive 220,988 square feet in the third quarter, negative (101,772) square feet in the second quarter and negative (87,168) square feet in the first quarter. Specifically, in the Class-A office market, 35,546 square feet of space was absorbed. The Class B market had a negative net absorption of (45,836) square feet. Net absorption for the central business district (CBD) was positive 10,686 square feet.
- Vacancy rates across the office market are decreasing at a noticeable rate. The overall office market saw a dip in vacancy to 8.8% at the end of 2014. The vacancy rate had been 8.9% at the end of the third quarter, 9.5% at the end of the second quarter and 9.2% at the end of the first quarter.
- Rental rates averaged at $15.00 per square foot for all classes. This represents almost a 5% increase from quoted rental rates at the end of the third quarter 2014, when rents were reported at $14.33. The average quoted rate within the Class-A sector was $21.32 at the end of the fourth quarter 2014, while Class-B rates stood at $14.00. Rates in the CBD ended 2014 at $20.45.
The Greenville area has been featured on Top 10 "best" lists, sites and shows for almost all of 2014. A majority of these announcements and accolades are centered on the retail market in this area. At mid-year 2014, we reported on the effects of completion of projects such as Project One in Downtown Greenville and Magnolia Park on Woodruff Road as well as the announcement of the $100 million Laurens Road redevelopment project. Surprisingly with all the new activity, the Greenville/Spartanburg retail market has not experienced many dramatic changes over 2014 in terms of vacancy rates, net absorption, or rental rates.
- The vacancy rate has hovered around 6.8% for almost four years now, and 2014 is no exception. The retail market's vacancy rate slowly declined in 2014, with the rate at 6.9% in the first quarter, 6.8% in the second quarter, and 6.7% at the end of the third and fourth quarter.
- The mild changes in vacancy rate mirror the moderate net absorption rates the market has experienced all year. For the fourth quarter, the retail market recorded a positive net absorption of 157,321 square feet. This compares to a positive net absorption of 109,620 square feet in the third quarter, while in second quarter absorption came in at positive 102,582 square feet. In the first quarter, 253,039 square feet was absorbed.
- Rental rates are up over previous quarter levels and up from their levels four quarters ago. Quoted rents ended the fourth quarter 2014 at $9.60 per square foot per year. That compares to $9.28 per square foot in the third quarter as well as the end of the first quarter. This represents a 3.4% increase in rental rates in the current quarter and a 3.33% increase from fourth quarter 2013.
- During the fourth quarter 2014, 11 buildings totaling 165,225 square feet were completed in the Greenville/Spartanburg retail market. In addition to the fourth quarter, seven buildings with 37,374 square feet were completed in the third quarter, four buildings totaling 36,100 square feet were completed in the second quarter and 147,880 square feet in six buildings were completed in the first quarter. This equates to a total of 386,579 square feet of retail space that has been built in the market over the past four quarters alone.
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